Tiger Airways is selling a 60 per cent stake in its Australian operations to Virgin Australia, and Singapore Airlines is making a $105 million investment to take a 10 per cent stake in Virgin.

The Singapore-listed, and 40 per cent Singapore Government-owned, budget carrier Tiger is selling the majority stake in its loss-making Australian offshoot to Virgin Australia for $35 million.

Tiger Australia will also pay an undisclosed annual license fee to Tiger's Singapore-listed parent company for at least 20 years for use of the brand, with the fee based on a fixed percentage of gross revenue.

The Australian company will also pay its Singaporean parent $5 million if it achieves certain financial performance targets within five years.

Tiger and Virgin have agreed to invest up to a further $62.5 million between them to grow the low-cost Australian carrier, with plans to expand the fleet from 11 aircraft currently up to 35 by 2018.

Virgin Australia has been repositioning itself as a premium airline brand to compete in the business traveller market against Qantas, and its chief executive John Borghetti says this deal will keep a strong foothold in the budget travel market.

"This transaction enables Virgin Australia to access the budget market and enables Tiger Australia to expedite its growth, providing greater competition to this important market segment," he said in a statement.

The companies say Tiger Australia will be managed as a standalone business, with John Borghetti as its inaugural chairman under the new structure, and the position to be rotated every two years.

Tiger Airways today announced a loss of $18 million for the September quarter, due to a $20 million loss by Tiger Australia.

Singapore stake

Singapore Airlines, majority owned by Singapore's Government, is paying 42.88 cents a share for an issue of 245.6 million Virgin Australia shares that will give it a 10 per cent stake in the company.

The total investment by Singapore Airlines is worth $105 million.

Virgin says the share issue is being made at the 30 trading day volume weighted average market share price as at October 26.

Singapore Airlines has also been given anti-dilution rights to maintain its 10 per cent stake in the event that Virgin Australia issues new shares in the future.

The Singaporean state carrier now joins Middle East airline Etihad which also has a 10 per cent stake in Virgin.

When one competitor leaves the market or there is a merger or a synthesis, which means a reduction in intensity of competition, you typically see prices go up around 8 to 10 per cent, so I can't see fares going down.

Associate Professor Tony Webber

Virgin says the placement of shares to Singapore Airlines has already received approval under the Australian Government's foreign investment policy.

The various deals with Singaporean airlines by Virgin come after Qantas last month announced a partnership with Emirates that will see it ditch Singapore as its major hub for flights to Europe.

Skywest takeover

Virgin Australia has also announced a takeover offer for regional and fly-in, fly-out (FIFO) airline Skywest.

The offer will be worth around 45 cents per Skywest share, made up of 22.5 cents in cash and 0.53 Virgin shares for every Skywest share.

Virgin says the offer has the in-principle agreement of Skywest's board, but will need approval from Skywest shareholders as well as Australian and Singaporean regulators.

Virgin chief executive John Borghetti says the move will allow his company to fast track its growth in the regional and fly-in, fly-out worker transport markets.

"We launched a regional network partnership with Skywest in October 2011 and now we will be able to realise the full potential of the operation through developing a more integrated network, service and frequent flyer program," he said in a statement.

"Importantly, we will continue to invest to support the growth of Skywest, which will benefit jobs, business and tourism, particularly in Western Australia and throughout regional Australia."

Virgin says Skywest will continue to operate as a distinct brand, under its own Air Operator's Certificate and management team based in Western Australia.

Aviation strategist Neil Hansford says the deals should bring more competitive fares and more services for air passengers.

"The Australian market is consolidating back to what we had when we had Qantas and Ansett, with Virgin acquiring a low cost brand in Tiger, plus they've taken Skywest who they've been collaborating with," he said.

"You're then getting two major groupings offering prices and products across the whole market."

However, former Qantas economist Tony Webber says Virgin's effective takeover of Tiger is likely to result in a reduction of seats on some routes.

"That's when you'll see fares go up typically, when one competitor leaves the market or there is a merger or a synthesis, which means a reduction in intensity of competition, you typically see prices go up around 8 to 10 per cent, so I can't see fares going down," he said.

Virgin shares have climbed on the deal announcements, rising 6.5 per cent to 49 cents by the close of trade.

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